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Is your child planning to go to college? Planning to save for their education can be challenging if you don't know where to start. To help parents best prepare their children financially for college, I asked financial coaches and mature parents how you can help financially prepare your child for college. From having relatives contribute to a 529 plan to considering studying abroad at a cheaper cost, there are several practical ways that parents may get their wards well-prepared financially for their time in college.
Financially Preparing Children for College
Have Relatives Contribute to a 529 Plan
I have a young daughter, and we have a 529 plan started for her. When family and grandparents ask about getting gifts, we tell them they can also contribute tax-free to the 529 plan. This is a great way to increase the college fund even further. It's not the most exciting gift for a child, but when they are ready for college, they will be very thankful for the small gift contributions that family members gave and how much it grew over those years.
- Evan McCarthy, SportingSmiles
Get Them to Save 75% of Their Earnings
Parents of teens should require them to set aside most of their earnings and put them in a savings account. Teens don't need to pocket more than 25% of their earnings as they don't have rent to pay or any other significant costs. That money should be set aside for when they are faced with steep costs. When the time comes to pay for textbooks and other costs associated with college, that saved-up money should cover them.
- Chris Riley, USA Rx
Teach Them How to Budget and Use Credit Cards Responsibly
Learning to budget with a credit card is an important skill your child should learn before leaving home. New college students have to budget for books, meals, and other expenses for perhaps the first time, and many of these expenses are typically paid for by credit cards. If your child is new to being responsible for a credit card, this financial freedom can quickly put them into debt. Teach your child to budget and spend only what they can pay off on a credit card. By learning to use a credit card responsibly, your child will have the skills to be financially prepared.
- Brett Estep, Insured Nomads
Give Them a Fixed Monthly Lump Sum Allowance
Deposit a lump sum into their accounts at the beginning of every month so they can practice budgeting. This will teach them how much they should spend each week to have enough money to last until the month's end. If they express no difficulty with this, you could always make it more challenging by depositing only once every two months or once per semester. Aside from encouraging consistent and healthy spending habits, this method promotes discipline, responsibility, and forward thinking.
- Eric Ang, One Search Pro
Encourage The Kids to Get a Job
Encouraging their kids to get a job and pay some share of their costs (transportation, entertainment, etc.) is an excellent way for parents to help prepare for college. Beyond expanding their financial literacy, employment will show teenagers how authority and management structures work. The lessons of autonomy and how to budget properly are essential benefits of having a job and its associated responsibilities.
- Thomas Yuan, Sanebox
Teach Them to Explore the Various Student Aid Options
One way parents can help their children financially prepare for college is by ensuring they take advantage of all the student aid options available to them. College students can get financial aid from many sources, including federal and state governments and private organizations. Students should fill out the FAFSA form every year to see what types of aid they qualify for.
- Chad Rubin, Profasee
Consider Studying Abroad at a Cheaper Cost
Studying abroad is rarely discussed or even considered. However, international degree programs are highly recognized and respected. For example, attending a university in Argentina will cost a student $5,000 a program compared to $26,000 in an American university. The costs are significantly cheaper than studying within the United States. In addition, a prestigious foreign degree program will have plenty of opportunities for scholarships, and financial aid programs, to help students from all over the world. Completing the program means less debt and stress of paying back thousands of dollars and gives young adults financial freedom upon graduation.
- Benjamin Earley, HOLT